Fonterra Faces Pressure as Global Dairy Trade Declines Continue

Fonterra Co-operative Group is experiencing mounting market pressure due to seven consecutive declines in Global Dairy Trade (GDT) auction prices. The company may be forced to adjust its milk price forecast downward as a result. Under New Zealand’s Dairy Industry Restructuring Act (DIRA), Fonterra must publicly disclose any forecast movement of 30 cents or more.

The latest GDT auction revealed widespread commodity weakness, with whole milk powder (WMP) dropping by 1.9% and a cumulative 21% since May. Skim milk powder (SMP) also fell by 0.6%, while cheddar and mozzarella experienced declines of 2.7% each, indicating a systemic issue across dairy products.

Cristina Alvarado, the NZX head of dairy insights, attributes the GDT index drop to factors such as high milk flows from major exporting regions, subdued seasonal consumption, and tightening macroeconomic conditions in key import markets.

Dairy analysts suggest that unless global supply moderates significantly, market recovery may remain elusive. This situation is critical for the international dairy community, as New Zealand’s pricing often influences global market trends.